Trading technology professionals can look forward to a year of demanding – and exciting – change, according to speakers and panellists at this week’s A-Team Trading Tech Summit in London.
UK- and EU-based firms can expect more regulatory developments – brought about by Brexit, the so-called MiFID II Refit and changes to Market Abuse Regulation (MAR). At the same time, new opportunities are being created for financial services firms by cloud technologies, forcing a rethink to approaches to infrastructure, connectivity, market data and analytics.
The morning kicked off with a regulatory keynote address by Dr. David Doyle, EU policy advisor, financial services regulation, and a board member of the MEP-led Kangaroo Group, based in Brussels. Doyle outlined a robust regulatory agenda for the EU during 2020, including the recently launched public consultation on MiFID II, work on climate change and ESG risks within the financial sector, a new prudential regime for investment firms, and a rationalization of the cybersecurity rules that impact the EU’s financial services sector.
Brexit is also going to add to political and regulatory uncertainty, with the transition period ending at the end of this year and for the financial services industry an important negotiating point within any future trade agreement. “The European Commission is only too well aware of the risks of us not finding a solution for the continuing trading, settlement and clearing operations between the United Kingdom and the rest of Europe,” said Doyle. “When we have such a high proportion of trading and clearing done in London, one cannot ignore this.”
Speakers on the Thought Leader (User) Panel: Trading in the post Brexit EMEA trading environment expressed their concerns about Brexit. They pointed out that no matter what the negotiated outcome is, there will be significant change in store for financial services firms. They also said they believed the MiFID II refit is too wide in scope and that it is happening too soon after the implementation date of 3 January 2018.
Excitement around the cloud
However, all was not doom and gloom. The possibilities that the Cloud offers for data storage and analytics was alluded to by several speakers. They noted that while cost efficiencies can be gained from shifting certain use cases to the Cloud, boards and the C-suite should also consider the business opportunities and agility that such a move could deliver. Alex Stepney, financial services customer engagement lead at Google Cloud, said customers are beginning to ask: “How can I look at what my next-generation applications look like? What are the new business models I need to be thinking of? What are the revenue streams that I need to be looking into? Those are the conversations that we are having right now.”
Panellists at the Optimising Outsourced Infrastructure to Enable Focus on Value Added Capabilities session were also very positive about what could be achieved over the coming year. Certainly, UK and EU regulators are giving outsourcing arrangements more scrutiny, with new rules and guidance in development. In December 2019, the UK’s Prudential Regulatory Authority (PRA) published Outsourcing and Third Party Risk Management, which would require firms to put in place more governance and controls around these relationships. Also, the UK Financial Conduct Authority (FCA) put out Building operational resilience: impact tolerances for important business services, which follows on from a consultation in July 2018. Third party and outsourcing risks and controls are also mentioned here, particularly in the context of cybersecurity. Both documents address financial services firms’ relationships with Cloud providers.
However, panellists felt that the limitations on what could be accomplished with outsourcing providers is today less limited by technology and more constrained by firms’ cultures. Achieving buy-in for outsourcing plans from business stakeholders, particularly in the trading technology space, is crucial and can make or break the success of a project. The good news is that these hurdles can be overcome by working to build trust with stakeholders from the very beginning of any outsourcing project.
The New World of Market Data panellists were also excited about what lay ahead, with the advent of new data sources, alternative data, and the provision of data in the Cloud. A key trend for the entire financial services industry is the increased consumption of data. Holding back progress, however, are the perceived inflexibility of data vendor contracts. For example, panellists said that at a time when their own organizations were rapidly evolving, they worried about potential stranded costs from multi-year, “all or nothing” data vendor contracts. Firms would rather pay fees that are demand-driven, based on the data that is actually used, and flexible.
Keep an eye open for other TTI events coming this year!